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What Were They Thinking?

When was the last time you exclaimed in total disbelief “What were they thinking?” once the full implications of a critical decision sunk in? Coming at a challenge from a different perspective than the decision-maker in question, we cannot always follow the line of reasoning that led to that decision.

Nonetheless, the unmistakable measure for successful management is the quality of the decisions we make. To be precise, it’s not only the actual choice between alternative courses of action but the process of creating those alternatives in the first place; the Decision-Making Process.

Over the years, I’ve seen two diametrically opposed approaches to solving challenges. The first one is based on a DES-cription of your challenge and the context in which it occurs. You become aware of your business results as they deviate from your operational goals. Note that there are only four sources that can cause variation from your goals:

  • Natural variation

Seasonal effects. Timothy Fuller once said that management will have made a giant leap forward when they stop asking you to explain natural variation.

  • Operational behavior

Effectiveness; extent at which you deliver on your promises.

Efficiency; cost associated with delivering on your promises.

  • Strategic direction

Planning, Execution and Control of the realization of your vision. Strategy is subject to change because your internal and external environments change over time.

  • Alignment of operational behavior with strategic direction

Integrity; are you progressing in the direction of your vision?

Once you are aware of the symptoms you can start a formal root-cause analysis. Once you know what causes your challenges you can create a list of possible solutions. From that list you create an Authentic Solution™; a solution that addresses the root-cause, that aligns with strategy and that generates synergy among existing processes.

 The other approach to decision-making is based on a PRE-scription; following someone else’s line of reasoning such as best practices and case studies from success literature. This is the over-the-counter market for business solutions; looking for the quick fix to get rid of whatever symptoms is troubling you – a trial-and-error approach with different ingredients and brand names.

Characteristic of this widespread approach is matching symptoms with solutions, regardless of what causes the symptoms. A single symptom can have many causes; you can run out of cash because you don’t sell enough or because you’re wildly successful and funding the production eats up all your cash. Obviously, these different challenges have similar symptoms that originate from different causes and thus require different solutions.

Here’s my theory about our preference for comparing challenges: case studies. The United States of America, similar to the United Kingdom has a legal system that’s based on case-law. We match untried cases with cases that went before a judge and produced a favorable outcome. Consequently, we derive the applicable law for the new proceedings from that particular past case.

Business schools have followed that same model of matching symptoms, looking for a well documented case that produced the desired outcome and then prescribing the same course of action. However, business is a social study and not a science where you can replicate the same results over-and-over again. Business is all about people, no matter how much automation you put in. Your clients are people and they operate on an emotional level, regardless of your rational thought in operating your business. Furthermore, people learn from experience and, hopefully, change their behavior accordingly. In other words, there’s not much constancy in business as there is in the legal system. Old case studies refer to past situations, in different industries, operating in different geographical locations, under different socio-economic situations and different consumer needs.

So, what ARE they thinking when decision-makers choose an IN-Authentic Solution that only addresses the symptom, possibly changes the strategic direction, and throws the existing processes in disarray? I understand the preference for instant-gratification but not at the expense of sustainability, respect for humanity and ultimately long-term profitability!

If you want to differentiate yourself from your competitors, then ask me to help you with your decision-making process; that’s what I do best!

One Comment

  1. Colin Sanderson
    Posted August 18, 2010 at 17:00 | Permalink

    Much enjoyed many of your postings. Yet here I am not persuaded of the contrast you make between the study of case-law and that of businesses. The matter is complicated in that comparisons of cases at law, unless the new case is destined to set a new precedent, rely on a rule based system. Yet I believe patterns do arise from the study of different businesses, or of the same business as an activity at different times. (Pace, Isaiah Berlin, et al.)
    I am not sure that it is useful to say that the study of business is either a science or not a science. The mathematician, William Kingdom Clifford in the 19thC stated that there are no scientific subjects. This is a striking statement, but is explained by the fact that whatever one studies, in art or in nature, one can study it scientifically or not. That is, it is not the subject of study which makes a science, but the tools or methods one brings to that study.
    At the outset, the application of logic, which you rightly demand, is at least proto-scientific. Hence classically its teaching as a preparation to philosophy, including natural and moral philosophy. But there are many other scientific tools which can be and are brought to bear. Even a set of annual or quarterly accounts provides measurements, perhaps crude, of a business’s performance over time. What inferences are drawn from them, however, may differ between different individuals. The more complete the accounts, the less should be that individual variation.
    I am persuaded that Operational Research (OR), by any other name (Management Science, Cybernetics, General Systems Science, or, more weakly, Systems Thinking), is applicable and effective in analysing and running a business. And I accept its designation as employing scientific methods; not necessarily experimental method, although once one has the operational model, one can surely perform “what if” “experiments”. (Controlled experiment is one gold standard of science, but it is not the only scientific method.)
    Yet I am not a practitioner myself, so I must rely on listening to and studying the work of others. I am still seeking classic case studies of the successful application of OR, etc. Whether generalisations can be drawn therefrom, and applied in other instances, is obviously an important question. I need to study more! Then, maybe, my comments might be more useful. 🙂 But again, thanks for the stimulus.

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